eCardless Bancorp, Ltd. v. PayPal Holdings, Inc.

Background

eCardless Bancorp, Ltd. sued PayPal Inc. for allegedly infringing four patents concerning internet purchases and transaction verification: U.S. Patent Nos. 7,599,862, 7,599,863, 9,202,206, and 9,785,942. The first two patents concern communications among a customer, merchant, and bank during an online transaction. The latter two add location-based device verification, including verification using positioning information such as GPS data.

The court held a patent tutorial and a Markman hearing, at which the parties presented arguments about the meaning of disputed patent-claim terms. Claim construction is the court’s interpretation of the words and limitations in patent claims. The court also considered whether certain claims were indefinite. A claim is indefinite when, read in light of the patent and its prosecution history, it does not inform skilled readers with reasonable certainty about the scope of the invention.

Agreed Terms

The court approved and adopted the parties’ agreed constructions for several terms in the ’862 and ’863 Patents. These constructions addressed how later references to customer order variables derive their antecedent basis—that is, which earlier claim language they refer back to.

Disputed Terms and Holdings

“Transaction identifier” or “transaction identification”

For the independent claims of the ’862 and ’863 Patents, the court adopted PayPal’s proposed construction: “an identifier that is created by the customer, merchant or both and used for completing a transaction.”

The court found that eCardless made clear statements during prosecution of the parent application distinguishing prior art that used a bank-created proxy card number. The court determined that these statements clearly and unmistakably disclaimed transaction identifiers created by the bank. It held that the prosecution disclaimer applied to the continuation patents because the relevant claim limitation appeared in a similar context.

“Said . . . at least one order variable”

For Claim 9 of the ’863 Patent, the court adopted eCardless’s proposed construction: “field of information included in an order file.” The court rejected PayPal’s argument that the order variable communicated from the bank computer to the merchant computer had to be the same information previously communicated from the customer computer to the bank computer.

The court concluded that Claim 9’s wording gives the two references to “at least one order variable” different meanings. The order variable sent to the merchant only had to be information not previously known to the merchant computer. The court cited the patent’s example that the bank could provide the merchant with an authorized delivery address based on customer-account records or other information.

Location-verification term

For specified claims of the ’206 and ’942 Patents, the court adopted eCardless’s proposed construction: “verifying based on comparing the [computer/computer device] positioning location to a stored authorized location.”

The court rejected PayPal’s proposal to require that the authorized location be associated with the customer or merchant. The court found that the patent specification disclosed using third-party information, including information from credit-reporting services, government entities, public records, or other sources. The court also found that the prosecution history did not require the authorized location to be associated with the customer or merchant.

“Communicating between the customer computer and the bank computer . . . including transaction identification”

For Claim 9 of both the ’862 and ’863 Patents, the court rejected PayPal’s proposed correction that would have treated the transaction identification in multiple claim limitations as one identification. The court found that it lacked authority to make that correction because the claim language and specification did not establish that the correction was the only reasonable interpretation.

The court then held the claims indefinite. Claim 9 refers to a transaction identification in an earlier customer-merchant communication and another transaction identification in a customer-bank communication. Later, it refers to “said transaction identification” in the bank-merchant communication. Because the court determined that the two earlier transaction identifications could be different, the claim did not make clear which one the later phrase referred to. The specification did not resolve that ambiguity.

Disposition

The court construed the agreed and disputed terms as described above. It held that Claim 9 of the ’862 Patent and Claim 9 of the ’863 Patent are indefinite because the phrase “said transaction identification” lacks a clear antecedent basis. The opinion does not determine whether PayPal infringed the patents.